Managing Reliability During Plant Closure Process at Balzac

November 2010

Prepared by: Doug Wallace, R.E.T. Nexen Inc.

Balzac’s 6 Focus Areas

Balzac’s 6 Focus Areas

• Employee Engagement Objectives:

• Ensure effective communications to all plant personnel.

• Employee involvement and/or awareness in changes, progress, or status.

• KPI (Key Performance Indicator) Alignment Objectives:

• Scorecard to determine how are we doing as a facility.

• Are we improving?

Balzac’s 6 Focus Areas

• Process Alignment Objectives:

• Ensure business processes align between all groups within facility.

• Optimize processes; ensure processes are effective, efficient, and cost effective.

• PSM (Process Safety Management) Objectives:

• Maintain PSM alignment with all of Nexen Canadian Oil & Gas Division.

• Mitigate operating hazards.

• Plant Downturn Objective:

• Maximize plant value (now realigned).

Balzac’s 6 Focus Areas

• Reliability Objectives:

• Improve reliability performance.

• Reduce costs; maximize profitability.

• Optimize equipment operation (i.e. adequate sparing; excessive redundancy, etc).

• Build a specific asset management plan for every piece of equipment.

Reliability Focus Area – Change In Direction

Reliability Initiative – Operation Until 2011 Plant Shutdown

• On March 17, 2010 a formal announcement was made stating the Balzac Gas Plant will be permanently shut down/retired no later than August 31, 2011.

• Tentative plan is to shut the inlet to the plant May 2, 2011.

• There are potential options with gas diversion however using the inlet of the gas plant as a 3 stage booster station is likely not an economic option.

• Likely any gas diversion project would involve new stand alone field equipment or possibly using some existing field equipment (i.e. gas compression); (some high H2S content gas would be abandoned)

Reliability Initiative – Operation Until 2011 Plant Shutdown

• How is Nexen Managing the facility’s equipment from now until permanent plant shutdown?

• No longer planning for long term sustained operation of the facility.

• What challenges will be faced with this change in operating strategy?

Reliability Initiative – Operation Until 2011 Plant Shutdown

Reliability Initiative – Operation Until 2011 Plant Shutdown

• What’s changed in the physical operation of the facility from a year ago to now?

• Nothing has changed; all of the same equipment in operation. Physical operation of the plant is “business as usual”.

(3 field compressors have been decommissioned but negligible change)

Reliability Initiative – Operation Until 2011 Plant Shutdown

• What is Nexen’s goal moving forward at Balzac with reliability?

• What is Nexen trying to accomplish with reliability now?

“Safely and reliably manage the remaining operating life of the Balzac Gas Plant until permanent

retirement of the facility in 2011.”

Reliability Initiative – Operation Until 2011 Plant Shutdown

• What does reliability look like to ensure Nexen meets this goal?

“How do we best manage the assets until the completion of the facility’s operating life?”

Reliability Initiative – Operation Until 2011 Plant Shutdown

“We must keep our eye on the ball”

Reliability Initiative – Operation Until 2011 Plant Shutdown

“We must keep our eye on the ball”

Reliability Initiative – Operation Until 2011 Plant Shutdown

“We must keep our eye on the ball”

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

1. Complacency

“Reliability at Balzac isn’t important anymore; just run the place as-is

until the end”

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to mitigate concerns with complacency:

• Balzac Strategy Steering Committee: consists of 9 sub-projects i.e. gas diversion to HR (people) strategy.

• Emphasizing importance of meeting KPI’s.

• Employee engagement in process.

• Consistent communications with employees.

• Positive support from leadership staff.

• Keep staff motivated and involved for remainder of the facility’s operation.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

2. Premature loss of experienced staff

• Loss of experienced staff (hourly and managerial) has occurred since the March announcement; using new personnel with little site specific training and/or contract personnel to assist with the operation and maintenance of the facility.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to mitigate concerns with loss of staff:

• Majority of staff that have left were not long term employees.

• Still many long term experienced staff at facility (i.e. hourly, hourly leads, technical support, leadership roles).

• Plant operations rotation changed to 4 shift system.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to mitigate concerns with loss of staff (cont….):

• Some roles have shifted to accommodate (i.e. technical support spending more time with hourly employees – troubleshooting, analysis, providing direction).

• Contract personnel, retirees, new grads working out well.

• Commitment to facility from staff to safely and competently operate plant until facility retirement date.

• Balzac employee survey showed 99% of staff are committed to bringing the facility to safe shutdown; shows pride/integrity

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

3. Ensure primary focus remains operation of facility• Must ensure the main focus for everyone is to keep the facility

operating reliably and safely for the remainder of its life.

• Unfortunately the plant closure has a personal effect on everyone who is employed at the facility; difficult to keep everyone focused on the operation.

• Balzac employees investigating other opportunities inside and outside of Nexen.

• Balzac employees assisting other areas in company; still have responsibilities and same (or more) work load at the gas plant.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to ensure primary focus remains operation of facility:

• Facility management must be made aware and approve all requests from within Nexen for Balzac employee support or information requests.

• Many Balzac employees have necessary knowledge and information required to assist with plant retirement process. Management supports Balzac employees assisting but cannot become bogged down with excessive work load supporting these efforts.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to ensure primary focus remains operation of facility (cont…):

• HR (People) Strategy; exploring options for employees; determining what each employee wants to do (i.e. retire, stay with Nexen, leave Nexen & move to something different, etc).

• Managers allowing some employees to explore and assist other areas (i.e. technical support to other areas/divisions); supported but monitored for overall workload.

• Nexen’s leadership team direction is to ensure focus remains on operating the facility; ensure “distractions” are minimized.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

4. Minimal upgrades to operating equipment • No more capital investment in the facility.

• Short term focus rather than long term operational vision.

• Some major equipment will be operated past recommended overhaul/major maintenance interval until permanent facility retirement.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to ensure reliability and continued safe operation with minimal equipment upgrades:

• Ensuring all regulatory requirements and PSM (Process Safety Management) task requirements are being complied with.

• Continue performing PM (Preventative Maintenance) and PdM (Predictive Maintenance) tasks on equipment; more frequently and diligently on equipment being operated marginally beyond planned major maintenance intervals.

• Review all required major and minor work; determine required repairs for duration of facility’s remaining operation (may not always require long term repair solution).

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Concerns with reliability for continued safe operation following the announcement of the plant closure:

5. Spares parts management • Reduce inventory as shutdown approaches; some inventory will

not be replenished.

• May not continue to carry all spares for all equipment; managed on an “as-required” basis.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• Processes in place to manage spares and materials:

• Investigate spares requirements individually as time moves closer to plant shutdown.

• Major repairable spares; individual basis for reconditioning.

• Minimizing inventory on bulk items such as lube oil and treating chemicals (optimize storage quantities).

• Equipment repair parts; reduce to minimum stock levels or not reordered (individually assessed based on criticality, delivery, etc).

• Reduce stocked consumables.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• How do we best manage the assets until the completion of the facility’s operating life?

• Realize inherent challenges in final operational period of facility.

• Keep direction on the task at hand (operating the facility); ensure staff is completely aligned with this.

• Be patient……many unknowns and likely challenges in the process of retiring the facility.

Reliability Initiative – Operation Until 2011 Plant Shutdown

• How do we best manage the assets until the completion of the facility’s operating life?

• Focus on accomplishing the goal:

“Safely and reliably manage the remaining operating life of the Balzac Gas Plant until permanent

retirement of the facility in 2011.”

Reliability Initiative – Operation Until 2011 Plant Shutdown

Reliability Initiative – Operation Until 2011 Plant Shutdown

Comments/Questions?